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Prison Time for Dispensary Owner Infiltrated by Undercover IRS Agents

by Brian S. Whalen, CPA September 28, 2018
Estimated Reading Time: 2 minutes

On September 17, 2018, a federal judge sentenced Matthew Price to seven months in federal prison for willfully failing to file tax returns between 2011 and 2014 (The IRS has a long memory).  Mr. Price is the owner of Canabliss & Co., a legal Portland Oregon based medical marijuana dispensary.  Upon completion of his prison sentence, Price will be on supervised release for three years with six months of home detention. He was also ordered to pay the IRS $262,776 in restitution.

The IRS initially investigated Price for not paying employment taxes for his employees.  According to an undercover IRS agent that approached Price as a potential employee, Price exposed himself.  He stated that he didn’t want to “get ripped” in taxes by putting employees on payroll, and also disclosed that he was using the money from his business for personal uses.  This prompted further investigation which revealed the failure to file tax returns.

Side note:  Cannabis CEOs should be aware of the IRS Cash Intensive Business Audit Guide

Canabliss’s Income ranged from approximately $42,000 to $590,000 per year as the initially modest operation gained traction.  Ironically, although Price helped the OLCC (Oregon Liquor Control Commission) write the regulations for the state’s cannabis industry, he failed to follow regulations.  At the time of this writing, Mr. Price’s ability to operate in the Oregon cannabis industry upon completion of his sentence is being debated by regulators.

Commingling business and personal funds will get you in trouble with the IRS.  In Price’s case, the commingled business proceeds were used for personal purchases, including an expensive sports car, Portland Trailblazers tickets, and a Rolex.  His defense was that he wasn’t sure what he could deduct, what records to keep, and that his accountants weren’t dependable.  The court wasn’t buying it.  The judge acknowledged that while Mr. Price did not “walk into this with an MBA”, he was intelligent enough to be aware of “one of the most basic obligations of running a business”.

RELATED:  Cannabis CEOs: Be Aware of this IRS Audit Guide

As an entrepreneur in an industry with rules that are changing daily, don’t make the mistake of procrastinating when it comes to the least exciting part of your business – pay your federal, state and local taxes, paying payroll taxes, and keeping good records.  Keep your business and personal accounts separate.  File your returns on time.  If you haven’t been 100% compliant thus far, fix it now before a federal prosecutor fixes it for you.

Department of Justice Press Release

 

Author – Brian S. Whalen, CPA

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